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Virtual Bidding in a Two-Settlement Electricity Market with Asymmetric Information

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posted on 2022-11-30, 05:13 authored by Yuxin LuYuxin Lu, Chenye Wu, Jiasheng Zhang

Virtual bidding is a financial instrument that bridges the day-ahead (DA) and real-time (RT) electricity market. With improved forecasting accuracy, virtual bidding shrinks the gap between the two markets and thus increases social welfare. In this process, arbitrage opportunities exist because participants may hold asymmetric information. In this work, we study the arbitrage behaviors in virtual bidding. Adopting a game theoretical framework, we illustrate how participants' benefits vary when information asymmetry exists in the process. Moreover, we conduct extensive numerical studies to investigate how participants' profits with extra information differentiate in various market situations. The numerical studies reveal that although privileged participants with more information than others can take advantage of the information asymmetry to gain profits, not all of them can benefit. In contrast, virtual bidders directly taking the publicly available information must bear a loss.


National Natural Science Foundation of China (Grant No. 72271213)

Guangdong Provincial Key Laboratory of Future Networks of Intelligence (Grant No. 2022B1212010001)


Email Address of Submitting Author

Submitting Author's Institution

University of Michigan, Ann Arbor

Submitting Author's Country

  • United States of America

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